December 22, 2017
Public Safety Personnel Retirement System
State of Arizona
December 22, 2017
Contact: Christian Palmer
Phone: 602-296-3736
Employer contribution rates are now available
Positive trend for overall funding level, but individual contribution rates vary
Effective July 1, 2018, the valuations reflect an average contribution rate increase of 3.3 percent while the results vary depending on circumstances for individual employers. Aggregate actuarial information for PSPRS reflected a sixth-tenths of 1 percent overall PSPRS funding level decrease to 46.6 percent.
The funding level decline was the result of PSPRS Board of Trustees decisions to decrease the assumed earnings rate to 7.4 from 7.5 percent and to adopt updated mortality tables to accommodate the increasing lifespans of retirees. Retroactive permanent benefit increases due to the Hall-Parker litigation did not significantly impact the overall funding level.
Several factors contributed to relative stability of the aggregate employer contribution rate even as rates may have increased for many individual employers. A potentially greater aggregate increase due to mortality table adjustments and assumed earnings rate deductions were offset by some of the larger employers’ decisions to extend amortization rates to 30 from 20 years.
PSPRS Administrator Jared Smout said the modest aggregate funding level and contribution rate movements were a positive sign overall, although some individual employers will have contribution rate increases greater than the average.
“Pension increases have put some state agencies, municipalities, and fire districts under a lot of financial stress but the actuarial report and valuations this year are a relatively good sign,” said Administrator Smout. “With the lawsuits behind us the dust has begun to settle. We believe that changes to the investment strategy and pension reforms like Senate Bill 1428 and Prop 124 have set the stage for gradually cutting employer costs and adding sustainability to the pension system for the long-term.”
Supported by PSPRS stakeholders, the proposition passed by voters in 2016 is expected to deliver long-term system savings of almost $500 million. Prop 124 is also credited with preventing the outcome of the Hall-Parker litigation from creating more severe pension expenses for local governments.
PSPRS investments generated an 11.85 percent return and produced nearly $1 billion for the trust in fiscal year 2017. This presented an outstanding rebound after flat markets held gains to less than one percent the previous year. PSPRS-managed plans, including the Elected Officials Retirement Plan and the Corrections Officers Retirement Plan, have roughly $9.5 billion in assets.
